J.P. Morgan Initiates on Bytes and Bechtle, Citing Limited AI Upside

J.P. Morgan initiated coverage on European value-added resellers Bytes Technology Group and Bechtle with an "Underweight" and "Neutral" rating, respectively, arguing that both companies have limited upside from the artificial intelligence boom. In a note published Monday, the bank reiterated Computacenter as its preferred name in the sector due to its exposure to hyperscale capital expenditure.

Headwinds for Bytes Technology

J.P. Morgan assigned Bytes an "Underweight" rating with a December 2027 price target of 375 pence, implying roughly 10% downside from current levels. The bank cited the company's low exposure to AI infrastructure, noting that its hardware business accounts for less than 10% of gross profit.

Analysts also highlighted risks related to Microsoft, which accounts for about 50% of Bytes' group gross profit. Recent changes to Microsoft's incentive structures, which prioritize new customer growth and usage over simple renewals, could pressure Bytes' near-term profit growth. J.P. Morgan's forecasts for Bytes' gross and operating profit are approximately 2% below consensus estimates for fiscal years 2027-2029.

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Cautious Outlook on Bechtle

For German IT provider Bechtle, J.P. Morgan initiated with a "Neutral" rating and a December 2027 price target of €38. The bank noted that Bechtle's earnings expectations already appear to factor in a cyclical recovery.

The firm's cautious stance is partly due to Bechtle's customer base, with close to 50% of its business volume tied to small and medium-sized businesses, which are considered less likely to make significant investments in AI-related infrastructure. J.P. Morgan said it does not expect a major uplift to financial targets at the company’s upcoming Capital Markets Day in September.